There is quite a good number of publicly traded companies in Nigeria compared to a lot of other countries. But what is the point of trading foreign stocks from Nigeria?
Stock trading has a lot of factors to it and a lot of people are convinced that trading internationally reduces risk. Others would say international stock trading is a risk but we would say that gains equal the risk. These are the opportunities for anyone interested in trading foreign stocks from Nigeria.
Global Depository Receipts (GDR) – Banks in Nigeria have issued shares of foreign companies in international markets. They make it available to investors who show interest. Fidelity and Guarantee Trust Bank, GTB, are some of them.
American Depository Receipts (ADR) – Buying foreign stock with ADR an equivalent of GDR, is convenient. Both individuals and companies use this receipt to trade stock internationally.
Foreign Direct Investing – This one gives an investor two options – either create a global account with a local broker or create an account a stockbroker in the country of interest.
Global Mutual Funds – The benefits and functionality if Global Mutual Funds are much like every domestic mutual fund. However, the GMF holds a portfolio of foreign stocks.
Conclusion
Experts who consider trading foreign stocks from Nigeria safe recommend 20%-25% allocation. Building up an international stock portfolio should be slow as it can be scaled up with time.
Whatever the gains may be, there is also the need to consider economic uncertainty, corruption and crises. These risk factors are not the worst of you consult certain investment strategies like the dollar-cost averaging and asset allocation first.
Also, expenses associated with international investment can be steep. They include foreign taxes on dividends, transaction costs, broker’s fund management fee.
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